Business crime, reconsidered

The morning sessions of CDR’s Summer Business Crime Symposium illustrated both general th...

The morning sessions of CDR’s Summer Business Crime Symposium illustrated both general themes in what is a rapidly developing area and specific instances of those themes, as well as the significant compliance consequences for corporate clients drawn into this area.

Opening the Symposium was Chris Warren-Smith of Morgan Lewis & Bockius who delivered the keynote address that gave wide-ranging focus on the key business crime challenges facing both clients and their counsel today.

Warren-Smith’s remarks, which were both considered and thoughtful, touched on the increasingly strategic role of compliance and the evolution of global regulatory and prosecutorial regimes, highlighting, for example, the growth of extraterritoriality in criminal offences as one trend that had become more pronounced in recent times.

Uncertainty, too, was a business concern among global general counsel, Warren-Smith noted; political unrest was but one facet of the risk profile they had to manage.

In contrasting the journey between 10 years ago and now, he illustrated both the fast-moving pace of the practice area, following the global financial crisis, but also the way in which institutions were evolving – making a strong case for their proper funding, management, and good governance of the wider criminal justice system in which they were situated; particularly amid the “piecemeal” nature of enforcement regimes in which clients had to manage, whether in terms of bribery, corruption or money laundering.

Such regimes, he added, were fast-moving and sometimes hard to track. This made compliance with the existing law hard to ensure, given, for example, differences between the standards of proof to be applied in such cases.

The philosophy behind such cases was also an issue, noted Warren-Smith; approaches to compliance were more proactive, with that discipline being used as much as a sword nowadays as it is a shield in defending corporate interests. Given the speed and reach of the 24-hour media cycle, he mused, the viral nature of allegations could spread rapidly, even before business can respond, however proactive they may be.

For that reason – and others – there was not a ‘one-size fits all’ way of approaching investigations, he warned. Those lawyers starting their careers should be mindful of their obligations “to act in the best interests of our clients and to use our legal skills and experience to their best advantage”.

Warren-Smith concluded: “The challenge to all of us in the profession is to see how we can better be part of the solution in ensuring proper and fair enforcement can take place, deploying our legal skills and experience, while helping our corporate clients deal with their challenges and achieve their strategic, ethical and moral objectives.”

THE PROSECUTORIAL LANDSCAPE DISCUSSED

The first panel of the session of the day considered the likely overall direction of travel of key criminal enforcement agencies, looking at future developments from global prosecutors, like the United Kingdom Serious Fraud Office (SFO) and the United States Department of Justice (DoJ), and their equivalents, and the latest policy, case law and sentencing issues affecting the business crime arena, as well as the prospects for private practitioners.

Chaired by Hannah Laming of Peters & Peters, the current chair of the Private Prosecutors Association, the session’s participants included Kristin Jones, head of the specialist fraud division at the Crown Prosecution Service (CPS), who had also served at a high level within the SFO , while the advocate’s position was given by Tom Little QC, the UK government’s Senior Treasury Counsel for criminal advocacy, of 9 Gough Square, while Barry Vitou, newly arrived London head of white-collar defence and special investigations at Greenberg Traurig, was on hand to give a defence perspective, assisted by Laming herself.

First on everyone’s mind: the recent appointment of the new director of the SFO, Lisa Osofsky, and its implications for the business crime community. Jones offered her insight as a former senior SFO prosecutor, opening up the wider context behind the hire, but also stressing the broad underlying continuity and change within both the CPS and the SFO on policy and procedures, notwithstanding the arrival of two new leaders of both bodies within this year, a theme other speakers concurred with.

To Vitou, while the appointment represented a further step towards the Americanisation of UK corporate criminal law enforcement, Little suggested that the extent of any change was likely to fall within the middle ground of current policy, while existing cases would be resolved as at present.

The discussion then moved to consideration of policies of the Trump administration’s DoJ; again, there was a consensus that the broad thrust of underlying work would not change, albeit that as Vitou noted, the DoJ’s capabilities were considerably broader than its UK counterparts; put simply, it could do, and agree, things like plea bargains and deferred prosecution agreements (DPAs) on a scale the SFO simply could not.

Following a brief discussion on Asian anti-corruption enforcement, and associated human rights concerns with Chinese activity in this area in Hong Kong, the discussion moved to initiatives concerned with anti-bribery. The long arm of the US’ Foreign Corrupt Practices Act, noted Vitou, had encouraged legislative reform in common law Commonwealth jurisdictions like Australia and Canada.

While the UK’s Bribery Act had been effective, it could not guarantee complete compliance, although it had had a positive effect, and stiffened the will of prosecutors internationally; crime, the audience heard, is necessarily omnipresent.

LITIGATION STRATEGY AND REGULATORY COMPLIANCE

Next up was a session on how to navigate both regulatory and compliance issues alongside being aware of their litigious outcomes. Ably chaired by Tim Parkes, himself the chair of the regulatory decisions committee at the Financial Conduct Authority (FCA), and a former partner at Herbert Smith Freehills (HSF), he was assisted in his task by Canadian, French and US-qualified lawyerNicolette Kost De Sevres, a partner at Mayer Brown in Washington, DC, while Emma Deas, a senior associate at HSF offered a practitioner’s perspective drawn from the banking litigation arena. Also on hand, with an in-house perspective, was Karl Foster, head of legal and global general counsel at MicroEnsure in Cheltenham.

Following an introduction by Parkes, which touched on the process of an investigation and the FCA’s approach to the issues in general, which stressed the importance of regulatory cooperation, both in fact as well as in intention, Deas gave an overview of the current state of the law on legal professional privilege (LPP) which looked at the forthcoming appeal (in July) in the ENRC litigation, while De Sevres illustrated how regulators approach such issues from the background of a lawyer who has practiced as such in a variety of jurisdictions, as well as illustrating new approaches to the subject – for example, in French approaches to anti-corruption compliance, following recent legislation. De Sevres supplemented Deas’s talk by addressing issues about the current position on legal privilege in France and the comparisons, while also touching on other issues like compliance.

Foster, meanwhile, gave the his view of how to manage such issues internally, as well as externally, showing his appreciation for the internal dynamics of how a company should respond, as well as the external factors to be considered, in what was a useful, practical and lively discussion.

CRISIS MANAGEMENT, CRITICAL RISKS AND COMPLIANCE STRATEGIES

The next session, without being overly self-referential to the legal media, considered how law firms, in-house counsel and external experts should react to a crisis situation, from inception to conclusion, and the media and other factors to be considered, building on the groundwork laid on both the first two sessions, and Warren-Smith’s address.

Gus Sellitto, managing director of Byfield Consultancy in London, chaired the session, as well as taking an active and informed part in the discussions, which were no less informed by his speaker panel, which included Melanie Ryan, a partner at Morgan Lewis & Bockius in London, while displaying keen awareness of internal and external nuances to be handled, and strong media handling skills, were Daniela Conte, an assistant director at Farrer Kane, and Fred Banning, head of communications at Pinsent Masons.

Banning spoke for many, in stressing both the need to prepare, and the flexibility to adapt, saying: “Preparation is critical but it's impossible to prepare for every scenario,” instead advising his audience to stress test possible scenarios and ensure that firms, and their clients, “have the correct thinking”.

Conte stressed the need to consider bringing in specialist reputation management services, saying that agencies could remain emotionally detached from a dispute, trade on stronger relationships with the national and broadcast media, while remaining objective and being prepared to deliver honest and frank advice to clients and lawyers alike.

Building on both Banning’s and Conte’s contributions, Ryan delivered her own thoughts with real verve and aplomb; using examples of positive and negative crisis situations to show her awareness of the interplay between regulatory compliance, media management and legal advice. Whether it was proper and timely reaction to social media, the need for crisis management planning, or taking the time to understand the cultural dimensions of any crisis, she left delegates with one clear take-out: on no account, should they “do nothing”. This theme of informed responsibility was strongly supported by her follow panellists.

The panel agreed that managing internal expectations was as important as external communications during a crisis situation – something Foster had stressed earlier – while setting an appropriate tone, without compromising on issues of liability, was equally important, the audience heard.

MANAGING BRIBERY AND CORRUPTION

The final panel of the morning looked how to manage bribery and anti-corruption issues, from investigation to enforcement, compliance to conclusion. Neill Blundell, currently of Eversheds Sutherland, but shortly to join Macfarlanes, chaired this session with stylish and energetic insight into the real issues underlying a complex topic, in which the various practitioners involved engaged in an insightful dialogue.

Money-laundering enforcement on both sides of the Atlantic was an active theme, he noted, while stressing that while there were differences of approach on enforcement issues, which were neither fundamental nor insurmountable; closer mutual understanding, and to some extent, cooperation, would overcome those differences.

He also praised the prospect of a shift in policy on DPA’s, contrasting Green’s caution with the need to conclude certain long-running investigations, and highlighted both the DoJ’s and SFO’s shared commitment to tackling anti-corruption issues.

Nichola Higgins, meanwhile, of Doughty Street Chambers, gave a second opinion on the law surrounding Mrs Justice Andrew’s ruling on ENRC and LPP, building on Deas’ presentation to highlight key issues in the judgment, which she suggested, the Court of Appeal may concern itself with. Higgins stressed the need for clarity in the law, and the need for it to recognise that “litigation tactics should encompass strategies to avoid litigation and to bring it to an end”.

Higgins made it clear to the audience that it was “essential to identify who the client is”. Simply to identify a person who is authorised to receive advice does not mean that advice is privileged, she warned; and her presentation presaged important arguments that will be heard in July.

Adding an important civil law perspective was Roman Richers of Homburger, who reminded the audience not just of the wider hinterland of compliance outside the European Union, but the ways in which this important jurisdiction, with its strong banking and financial services industries, has also addressed the challenges of such issues, a focus highlighted by recent events, as reported by CDR and the international media, following the Paradise Papers, and allegations surrounding FIFA, and suchlike.

The absence of LPP by in-house lawyers in Switzerland was his starting point, as was the revelation that hiring an external lawyer would not automatically supply the protections of that doctrine. He also touched on the importance of Brexit, going forward, in terms of mutual assistance and collaboration, while noting the proactive steps taken by Swiss federal prosecutors to extend their authority in corruption cases.

Closing out the session was Richard Abbey, a partner specialising in fraud investigation at EY, who detailed the ways in which third-party payments can be scrutinised, and equally as pertinently, the role played by lawyers and forensic teams in managing internal investigations, touching again on privilege and compliance issues, and stressing their importance in terms of adequate and appropriate management.

The second part of the day’s proceedings will be summarised in a report publishing tomorrow.

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